Los Angeles Enviromental Issues and Green Business Forum

Is Carbon Credit Trading Coming to California?

In May, the World Bank reported that the carbon market more than doubled in value last year to $64-billion from $31-billion in 2006. Credits representing some three billion tons of CO{-2} emissions traded hands, mainly involving European Union Allowances (EUAs) or Certified Emission Reductions (CERs). The latter credits are generated by energy projects in some 68 developing countries, and are certified by the United Nations to involve emissions reductions that would not have happened without financing from the credits.

Here in the US, a cap and trade is developing at a slower pace. Nonetheless, the New York Mercantile Exchange’s (NYMEX) recently started its Green Exchange by offering products based on European markets. But it is also developing futures and options that will reflect a regulated, market-based system now being implemented for utilities in the U.S. Northeast by eight states. Of course, the biggest opportunity will come if, as expected, the U.S. federal government passes a national cap-and-trade system.

NYMEX is also planning on developing products based on the Western Climate Initiative – led by California with membership by B.C. and Manitoba. At this point, the Western Climate Initiative, a collaboration by the Governors of seven states and three Canadian provinces, is scheduled to release a proposed design of the carbon trading system by August 2008.

A carbon credit system is an efficient way to buy time before new technologies can be introduced. Supporters argue that a regional system offers more environmental and economic benefits than a California only initiative –- such as the California Air Resources Board’s recently released draft road map for implementing the state’s landmark 2006 global warming law.